Fall in output puts textile sector loans at risk

The textile sector in the country is confronted with a three-faceted problem because of the low supply of electricity and gas. 

Firstly, production has decreased because of lower imports of raw materials. Also, demand for textile products has fallen owing to low demand for clothing in the international market amid the ongoing economic slowdown. But, the sector is finding it difficult to meet even the reduced demand as power and gas shortages are hampering production.

In such a situation, the banking industry of Bangladesh is going to enter a very critical time. 

Given the current energy supply, there is a 30% to 40% reduction in production in the textile sector. And the institutions in this sector usually take short-term loans. Hence, if production is hampered in this way, these businesses will not be able to pay off their debts.

Already, the banking industry is going through hard times due to instability in the foreign exchange market and soaring inflation. The cost of deposit is high, but the interest margin is almost zero due to the lending rate cap. So, there is no chance for banks to give out loans at a slightly lower interest rate. Besides, the capital of most of the banks is very less. 

I would say it is a crunch time for our economy and banking sector.

Syed Mahbubur Rahman is the managing director of Mutual Trust Bank Limited.